DOH Reverses Position on Overtime Pay Under The Wage Parity Act

Executive Summary: On November 2, 2015, the NYS Department of Health (“DOH”) issued important notices affecting the wage and overtime obligations of New York City and Nassau, Suffolk, and Westchester County home care agencies. In addition to setting Total Compensation under the Wage Parity Act for March 1, 2016 – February 28, 2017, the DOH reversed its existing position that overtime pay does not reduce the additional and supplemental wage package due on each episode of care hour worked under the Wage Parity Act. This reversal of position has major ramifications for the home care industry in downstate New York.

What was the DOH’s position on overtime? Until issuance of Dear Administrator Letters (“DALs”) titled “Official Notice of Home Care Worker Wage Parity Minimum Rate of Total Compensation,” on November 2, 2015, the DOH had said that, “(o)vertime was not included in the Total Compensation rate of $14.09″ under the Wage Parity Act.” (FAQ No. 7, Home Care Worker Wage Parity FAQs May 2014). Under that interpretation, an agency servicing a WPA covered case in New York City was obligated to pay overtime wages for all hours over 40 in a workweek PLUS an additional wage and benefit package of $4.09 (the “$4.09 Package”). On and after the effective date of the U.S. Department of Labor’s “Final Rule,” October 13, 2015, this meant that an overtime episode-of-care hour under the WPA had a labor cost of $15 in wages and $4.09 Package, for a total cost of $19.09.

What is the DOH’s new position on overtime? Each of the Notices issued by the DOH on November 2, 2015, one for New York City and one for Nassau, Suffolk, and Westchester County home care agencies, expressly state that “FAQ number 7 is superseded by this notice.” The Notices state further:

The Overtime premium pay (1/2 times the workers “regular rate of pay”) that employers are required to pay for overtime hours under state and federal minimum wage laws may be used to satisfy the Total Compensation required under the wage parity law. (emphasis added)

This means, says the DOH, that “if the Total compensation rate is $14.09, then the requirement to pay or prove $14.09 is fully satisfied by payment of $15, for that same hour of overtime.” No longer must an agency servicing a WPA case in New York City pay the $4.09 Package on top of $15.00 for an overtime hour.

What questions does this raise for home care agencies?

  1. If the actual cost to an agency for a WPA covered overtime hour as compared to a non-overtime hour has effectively been reduced to $15 per hour, instead of $19.09 per hour, will this reduction in the overtime premium to $.91 be given more weight in deciding whether to provide a worker with overtime hours in order to retain that worker and worker’s client and greater priority to “continuity of care” concerns?
  2. If the DOH’s “Notice Regarding Overtime Pay under Wage Parity,” is, as written, “provided to clarify the extent to which overtime can be used to satisfy the Total Compensation requirements for a given hour of overtime” is this clarification effective retroactively?
  3. If a home care agency has already paid WPA covered overtime hours at $19.09 per hour, is there any recourse or future reduction in WPA $4.09 Package obligations available to that agency?

If you have any questions regarding this Alert or would like our advice of your home care agency’s particular facts and circumstances, please contact our Home Care Group members, Stephen Zweig, Philip Davidoff or Eric Su in FordHarrison’s New York City office at (212) 453-5900, or the FordHarrison attorney with whom you usually work.

United States Supreme Court Denies Stay of Appeals Court Ruling Validating USDOL’s Final Rule

24-Hour Shift Cases: Now Far Too Costly To Service?

Executive Summary. Last week, a Manhattan Supreme Court Justice denied a motion to dismiss a class action lawsuit against Chinese–American Planning Council Home Attendant Program, Inc., brought for unpaid wages, overtime, and failing to pay workers properly under the Wage Parity Act, among other alleged violations. That alone is not newsworthy. What is newsworthy is the court’s statement that “(a)rguably, 12 NYCRR 142-3.1 (b) (a NYS Department of Labor Wage Order) indicates that an employee who works a 24-hour shift is entitled to 24 hours pay ….” Decisions from justices in both the Manhattan and Brooklyn Supreme Courts have now reached this same conclusion, which is very troublesome for agencies continuing to service these cases.

The Court’s Reasoning Why 24 Hours Wages Are Due

The court said that the Wage Order differentiates between 24-hour shift residential employees (who have no other home other than the client’s) and non-residential employees (who have their own home, in addition to the client’s), allowing an agency to deduct sleep-time and duty free time only for residential employees. Quoting from the Wage Order, the court found significant the omission of non-residential employees from the following exception:

(A) residential employee – one who lives on the premises of the employer – shall not be deemed to be permitted to work or required to be available to work: (1) during his or her normal sleeping hours solely because such employee is required to be on call during such hours; or (2) at any other time when he or she is free to leave the place of employment.

The court added that no deference was due to a NYS DOL 2010 Opinion Letter which said that residential and non-residential employees should be treated the same for purposes of these deductions from hours worked, because “courts are not required to embrace a regulatory construction that conflicts with the plain meaning of the promulgated language.” Further quoting from the Wage Order, the court also added that “Employees who are ‘on call’ are considered to be working during all hours that they are confined to the workplace including those hours in which they do not actually perform their duties.”

This reasoning is especially significant because it is broader than the U.S. Department of Labor’s (“DOL”) Final Rule on the Application of the Fair Labor Standards Act to Domestic Service, recently validated by the D.C. Court of Appeals, but not yet effective and in force. Although the Final Rule recognized the difference between 24-hour shift workers who live in a client’s home (which it terms “live-ins”) and 24-hour shift workers who do not, it did not limit the deduction of sleep time or duty free time to live-ins alone.  If the Manhattan and Brooklyn Supreme Court justices’ interpretation of New York law stands, it will supersede the federal rule on this issue.

The Bottom Line. Unless and until an appellate court in New York rules differently, home care agencies who employ “sleep-in” workers are exposed to potential current and past liability for 24-hour shift sleep-in cases when the worker is paid for fewer than 24 hours’ pay.

If you have any questions regarding this Alert or would like our advice regarding your home care agency’s particular facts and circumstances, please contact the author, Stephen Zweig, Partner in FordHarrison’s New York City office, who has counseled and defended home care agencies for over 35 years, at szweig@fordharrison.com or (212) 453-5900, or the FordHarrison attorney with whom you usually work.

DOL’s Final Rule Upheld by D.C. Court of Appeals

BREAKING NEWS: The D.C. Court of Appeals ruled today that the US Department of Labor’s (“DOL”) Final Rule on the Application of the Fair Labor Standards Act to Domestic Service (the “Final Rule”) is valid, because it is “grounded in a reasonable interpretation of the statute (FLSA) and is neither arbitrary nor capricious.” Under the Final Rule, home care agency workers are no longer covered by the FLSA’s companionship services exemption or its live-in domestic worker exemption. This decision is of serious concern to the home care industry. Whether the decision will be appealed to the U.S. Supreme Court remains to be seen.

What Questions Do Home Care Agencies Need To Have Answered?

  1. When will the change in the law be considered effective? The Final Rule was initially to be effective January 1, 2015, before it was invalidated by the district court. The D.C. Court of Appeals has reversed the district court, and remanded for entry of summary judgment in favor of the DOL. How will the District Court’s earlier decisions, or a delay in issuing its decision on remand, delay the effective date? What position will the DOL take on the effective date?
  2. When will the DOL begin to enforce the Final Rule? When the Final Rule was originally issued, the DOL said it would delay enforcement for six months from the effective date or until June 30, 2015, and for the remainder of 2015, would exercise prosecutorial discretion in determining whether to bring enforcement actions. Will the DOL still provide for a meaningful transition period?
  3. How does validation of the Final Rule affect private attorney lawsuits and class actions? Agencies are now obligated to pay time and one half the worker’s regular rate of pay for hours worked over 40 in a workweek. If a worker receives a base rate and a higher rate for certain hours (e.g. weekend), calculation of a worker’s overtime rate will be more difficult because it requires a weighted blending of the two rates to provide the regular rate of pay for that week. Employers who do not comply may be targeted by plaintiff’s lawyers.
  4. How does validation of the Final Rule affect enforcement actions by the NYS Department of Labor? The Final Rule effectively eliminates the differing treatment of workers under New York law based on whether they are employed by agencies or directly by households. Formerly, under the NYS Domestic Workers Bill of Rights, for- profit agency home care workers who qualified as “companions” under federal law only had to be paid overtime at one and one half the NYS minimum rate of pay. Now all agencies, for-profit and not-for-profit, must pay home care workers overtime at one and one-half times the individual worker’s regular rate of pay.
  5. What effect does the Final Rule have on the “hours worked” rules applicable to the home care industry? Is there a difference in the treatment of “live-in” workers versus “sleep-in” workers? What type of written agreements with 24 hour case workers must be entered into? Is it a “duty-free” hour if the worker is required to remain on-call on the premises? How must sleep time and travel time be handled?

If you have any questions regarding this Alert or would like our advice of your home care agency’s particular facts and circumstances, please contact the author, Stephen Zweig, Partner in FordHarrison’s New York City office, who has counseled and defended home care agencies for over 35 years, at szweig@fordharrison.com or (212) 453-5900, or the FordHarrison attorney with whom you usually work.

Brooklyn Judge Finds 13 Hours Pay for 24 Hour Case Lawful, Creating Split Among Kings County Justices

Executive Summary:

On May 4, 2015, Kings County Supreme Court Justice David I. Schmidt issued a decision in Adriana Moreno, et al. v. Future Care Health Services, Inc., et al., Index No. 500569/13, which concerned live-in home health aides (“live-ins”) who asserted they were not properly compensated for 24-hour shifts. Justice Schmidt decided that the plaintiffs did not meet the requirements as set forth under New York law for class certification to apply to all similar workers, and further deferred to the New York State Department of Labor’s (“NYDOL”) 2010 Opinion Letter (“2010 Opinion”), disagreeing with the live-ins, and upholding the homecare agency’s payment of the minimum 13 hours for 24-hour shifts.

Background:

The NYDOL 2010 Opinion considered the issue of live-in compensation for third-party agency employers, stating such employers were permitted to pay live-ins for 13 hours for a 24-hour shift, provided the live-in: (a) slept 8 hours (with at least 5 of such hours uninterrupted); and (b) received 3 uninterrupted hours for meals. The 2010 Opinion can be viewed here: http://labor.ny.gov/legal/counsel/pdf/Other/RO-09-0169%20-%20Live-In%20Companions.pdf.

The affordability of employing live-ins has been a hot topic in the homecare industry, which ultimately turns on how a live-in’s “hours worked” are defined. For more information on how an agency can defend itself against a private lawsuit targeting live-ins, view our firm’s December 12, 2014 LegalAlert: “Can Your Home Care Agency Afford to Employ Sleep-Ins?” here: http://www.fordharrison.com/can-your-agency-afford-to-employ-sleep-ins-1.

Decision:

Justice Schmidt relied on the framework outlined in the 2010 Opinion and found no “evidentiary detail” that demonstrated the live-ins in Moreno did not receive the necessary uninterrupted sleep or meal breaks to warrant more than the 13 hours’ pay they received. Moreover, Justice Schmidt noted the live-ins failed to show an “across the board policy” by their Employer which violated their right to compensation for all “hours worked.”

Justice Schmidt’s Moreno decision is welcome news for homecare agencies operating in Kings County and New York generally, as it signals a deviation from the harsh holding of fellow Kings County Supreme Court Justice Carolyn Demarest in Andreyeyeva v. New York Health Care, Inc., 45 Misc. 3d 820 (Sup. Ct., Kings County, Sept. 16, 2014). Just nine months ago, Justice Demarest’s Andreyeyeva decision sent shockwaves through the homecare industry, declaring that 24-hour shift workers should receive compensation for every single hour of their 24-hour shift, regardless of sleep or meal time. Judge Demarest’s decision is currently on appeal.

In December of 2014, Justice Schmidt had declined to grant a motion to dismiss in Melamed v. Americare Certified Special Serv., Inc., 2014 N.Y. Slip. Op. 33296 (Sup. Ct., Kings County, Dec. 11, 2014) and cited Andreyeyeva in support of his decision. In that case, Justice Schmidt declined to decide the issue of how many hours of pay was required on a 24-hour shift, stating that “any argument over whether or not the plaintiffs should be paid for every hour on site is irrelevant at this point since a grant of dismissal, in defendants’ favor, is not hinged upon such issue.” Id.

Conclusion

The disagreement between Supreme Court Justices in Kings County evidences how complicated the issue of compensable time is with regards to 24-hour shift workers. Although New York Labor Law (“NYLL”) requires that employees receive pay for “each hour worked,” reasonable minds (i.e. two Supreme Court Justices) now “split” and differ on what “hours worked” means in this context. If you have any questions regarding this Alert, please contact Danielle Moss at dmoss@fordharrison.com or Stephen Zweig at szweig@fordharrison.com of FordHarrison’s New York City office.

New York City Passes Ban-the-Box Legislation Affecting Private Employers

Executive Summary: On June 10, 2015, the New York City Council passed the NYC Fair Chance Act (the Act) in a landslide vote. Sponsored by New York City Council Member Jumaane Williams (D-Brooklyn), the Act amends the New York City Human Rights Law (NYCHRL) to prohibit private employers in New York City with four or more employees from inquiring into or otherwise considering an applicant’s criminal background history prior to extending a conditional offer of employment to the applicant. In 2011, Mayor Michael Bloomberg signed a law that prohibits New York City government employers from asking applicants during the initial application process whether they have been convicted of a crime. The Act now extends that law to private employers with at least four employees and “bans the box” that is commonly found on job applications by which employers inquire into applicants’ criminal histories.

Under the Act, employers may only inquire into an applicant’s criminal history after extending a conditional offer of employment. The Act defines “inquiry” as “any question communicated to an applicant in writing or otherwise, or any searches of publicly available records or consumer reports that are conducted for the purpose of obtaining an applicant’s criminal background information.” The Act also prohibits private employers from distributing any advertisement that expresses any limitation or specification in employment based on an individual’s arrest or criminal conviction. Employers who inquire into an applicant’s criminal history after making a conditional offer of employment must comply with the following requirements before taking any adverse employment action based on such inquiry:

  • provide the applicant with a written copy of the inquiry;
  • perform an analysis that is required by Article 23(a) of the New York Corrections Law;
  • provide the applicant with a copy of such analysis; and
  • provide the applicant with three business days to respond to the written analysis, during which time the employer must hold open the employment position for that applicant.

Importantly, the Act does not apply to any actions taken by employers pursuant to any federal, state or local law that requires criminal background checks for employment purposes or bars employment based on criminal history. Moreover, the Act exempts from coverage police officers, peace officers and certain positions within the Department of Citywide Administrative Services. Violations of the Act will be enforceable against private employers by the New York City Commission on Human Rights through an administrative procedure or a private right of action, and will be enforceable against public agencies by a proceeding brought pursuant to Article 78 of the New York Civil Practice Law and Rules (CPLR).

The Act will become effective 120 days after it is signed by Mayor Bill de Blasio, which is expected to take place shortly due to his support for the Act. Thereafter, New York City will join 17 states and more than 100 cities that have already adopted “ban-the-box” laws. However, only certain states and cities such as Hawaii, Massachusetts, Minnesota, New Jersey, Rhode Island, the District of Columbia, San Francisco and Chicago have enacted laws affecting inquiries by private employers regarding job applicants’ criminal background histories.

Employers’ Bottom Line: New York City employers are subject to an ever-increasing number of regulations with respect to their hiring practices. Notably, the NYC Fair Chance Act was passed just weeks after the passage of legislation that bars certain New York City employers from requesting or using current or prospective employees’ consumer credit histories for employment purposes. New York City employers should review the Act’s requirements and revise their employment applications and criminal background check policies accordingly to ensure compliance with the Act.

If you have any questions regarding this Act, other ban-the-box laws, or hiring practices in general, please feel free to contact the authors of this Alert, Philip Davidoff, pdavidoff@fordharrison.com, a partner in our New York City office, or Saima Zuberi, szuberi@fordharrison.com, an associate in our New York City office. You may also contact the FordHarrison attorney with whom you usually work.

24-HOUR SHIFT HOME CARE WORKERS

By Philip Davidoff

Executive Summary

Wage and hour claims in the home care industry are on the rise. One of the reasons is 24 hour shift home care workers are claiming they should be paid for more than 13 hours work, as is the practice in New York. Federal and state courts and the New York State Department of Labor generally have reached different conclusions on how many hours pay must be paid to 24 hour shift workers. This article explains the laws and conflicting interpretations and the steps employers can take to minimize their exposure to wage and hour claims.

DISCUSSION

Minimum Wage Rate

The federal Fair Labor Standards Act (FLSA) and the New York State Labor Law (NYLL) govern the wages paid and hours of work rules for home care workers. While similar in many respects they are not identical. The differences in these laws can result in costly missteps for employers.

It has been generally accepted that home care workers employed by home care agencies fall within the “companionship services” exemption of the FLSA.[i]. Under this exemption, home care workers are exempt from both the minimum wage and overtime requirements of the FLSA. Also, under the FLSA, a “live-in” worker is one who either has no residence other than the client’s home or works a minimum of five 24-hour shifts each workweek in the client’s home. In contrast, under the FLSA, a “sleep-in” worker works one or more 24 hour shifts each workweek in the client’s home, but does not work a minimum of five-24 hour shifts each workweek.

Independent of the FLSA, the minimum wage provisions of the NYLL provide, with few exceptions, that employers must pay at least the State’s minimum wage rate (currently $8.75 per hour in New York, $9.00 as of January 1, 2016) to all employees. New York courts and the New York State Department of Labor (“NYSDOL”) have said that home care workers employed by home care agencies are covered by this minimum wage provision.[ii],

Overtime Pay

Under New York’s Minimum Wage Order for Miscellaneous Industries and Occupations (“Miscellaneous Wage Order”), which governs overtime compensation in New York for most workers, home care workers are entitled to overtime pay at one and one-half time the State minimum wage rate, or $13.13 per hour.[iii] The Miscellaneous Wage Order provides:

An employer shall pay an employee for overtime at a wage rate of 1-1/2 times the employees regular rate in the manner and methods provided in and subject to the exemptions of sections 7 and 13 [of the FLSA] . . . . In addition, an employer shall pay employees subject to the exemptions of Section 13 [which includes the companionship services exemption of the FLSA] . . . overtime at a rate of 1-1/2 times the basic minimum hourly rate. (Emphasis added.)

Wage and Hour Lawsuits

Twenty-four hour shift employees are commonly referred to in the home care industry interchangeably as “live-in” or “sleep-in” workers. Each of these terms has a unique meaning, however, and they are not interchangeable. This difference in terminology has led to substantial confusion between decisions of the federal and state courts in New York and administrative interpretations by the NYS Department of Labor.

NYSDOL Opinion Letter

The NYSDOL, in a March 11, 2010 Opinion Letter (the “NYSDOL Opinion Letter”) contributed to the confusion over what term to use for 24-hour shift workers in New York, when it said:

[I]t is the opinion and policy of this Department that live-in employees must be paid not less than for thirteen hours per twenty-four hour period provided that they are afforded at least eight hours of sleep and actually receive five hours of uninterrupted sleep, and that they are afforded three hours for meals. If an aide does not receive five hours of uninterrupted sleep, the eight-hour sleep exclusion is not applicable and the employee must be paid for all eight hours. Similarly, if the aide is not actually afforded three work-free hours for meals, the three hour meal period exclusion is not applicable.

Counsel Opinion Letter, N.Y. Dep’t of Labor, RO-09-00169 Live-In Companions.

Note that the NYSDOL used the term “live-in” when enunciating this rule; a term that itself is not defined in the NYLL or its regulations. Under the NYLL, a home care worker who is directly employed by a client, household or family and who has no residence other than the client’s home is deemed a “residential” employee. By contrast, a home care worker who has her own residences is a “non-residential” employee. Although it is clearly lawful under NYLL to pay a “residential” employee 13 hours’ wages for a 24 hour shift (deducting 8 hours for qualified sleep-time and 3 hours for three hours for qualified mealtime), and only pay overtime after 44 hours worked in a workweek (instead of the usual 40 hours), there is no explicit statutory authority to apply this concept to a non-residential employee. Nonetheless, the NYSDOL Opinion Letter added “the Department applies the same test for determining the number of hours worked by all live-in employees,” irrespective of whether or not the employee resides in the home of the employer (i.e., is a “residential” or “non-residential” employee). In short, the NYSDOL conflated the terms “residential” and “non-residential” for purposes of determining the number of hours worked, and payable, to 24-hour shift employees, and, in so doing, also used the term “live-in” synonymously with the term “sleep-in” as it concerns 24-hour shift workers.

Federal and NYS Courts

Recently, two cases – one in a federal district court and the other in the New York Supreme Court, Kings County have addressed the interplay of the FLSA and NYLL in the context of 24-hour workers and have come to different conclusions on essentially the same questions concerning “hours worked” and overtime compensation for 24-hour shift workers.

In the first decision, Severin v. Project OHR, 10 Civ. 9696 (S.D.N.Y. June 20, 2012), 24-hour shift home care workers asserted class-wide claims for minimum wage and overtime violations under both the FLSA and the NYLL. The Court, after considering the sleep and meal time rules outlined in the 2010 NYSDOL Opinion Letter, applied these rules. The Court deferred to the NYSDOL’s opinion that their sleep and meal time rules applied whether the worker’s was a “residential” or “non-residential” employee under the NYLL; that is, to all home care workers assigned 24-hour shifts, whether or not the worker’s sole residency was the client’s home or the worker was employed by a third-party agency.

In the second decision, Andryeyeva v. New York Health Care Inc. d/b/a/ New York Home Attendant Agency et al., 2014 WL 4650233 (N.Y. Sup. Ct., Kings Cty. Sept. 16, 2014), the Court declined to follow the reasoning in Project OHR particularly as it concerned the NYSDOL Opinion Letter. In fact, the Court ruled that the NYSDOL Opinion Letter did not apply at all to “non-residential” employees, and totally rejected the NYSDOL policy that home care agencies can exclude from “hours worked” eight hours for sleep and three hours for meal time where the worker maintained a residence other than the client’s home. In short, the Court did not view the terms “live-in” and “sleep-in” synonymously, as did the NYSDOL and the Project OHR Court. Rather, it viewed the term “live-in” to be synonymous with “residential.”

According to this Kings County Court, because the workers “did not ‘reside’ in the home of their clients . . . the issue of the hours afforded for sleep or meals is irrelevant.” The Court concluded that “non-residential” home care workers must be paid for all 24 hours of a 24-hour shift to the extent they are required to remain in the client’s home.

Two additional decisions from another judge in the same court in Kings County have held the same. These decisions also required overtime pay if the worker worked more than 40 hours in a workweek. The Andryeyeva decision is presently on appeal.

Proactive Measures Employers Can Employ to Protect Themselves

The most significant issue for home care agencies employing home care workers on 24-hour shifts concern “hours worked” principles. Will the approach taken in the NYSDOL’s Opinion Letter, and followed in the Project OHR case, prevail, thereby permitting employers to satisfy applicable law if they pay the worker not less than for thirteen hours per twenty-four hour period, provided the workers are afforded at least eight hours of sleep and actually receive five hours of uninterrupted sleep, and that they are afforded and actually receive three duty-free hours for meals? Or, will the Andryeyeva approach to sleep and meal time ultimately prevail, and will home care employers in New York will be required to compensate their non-residential home care workers assigned to 24-hour shifts for all 24-hours?

Here are proactive measures employers can take to protect themselves:

  • Develop better policies and procedures to manage work hours.
    1. Agencies need policies and procedures that determine how 24-hours shift cases will be assigned and how the hours worked on these shifts will be monitored.
  • Use as much electronic technology as they can afford.
    1. Agencies need time-tracking software to require 24-hour workers to electronically record their work hours, sleep hours and duty-free hours and any interruption of those hours.
  • Bolster the employer’s credibility and the weight to be given facts favorable to the employer in rebutting wage and hour claims.
    1. Implement “hours worked” procedures that require verbal notice by the worker to the agency if the worker is unable to receive five continuous hours of sleep and three duty free hours during a twenty-four hour shift, or any interruptions in sleep or duty free time, and a written report by the worker to the agency on receipt of the worker’s payroll check that does not take this into account. Agencies also need to obtain worker sign-offs on policies and procedures stating these rules.
  • Warn workers that hours worked must be recorded accurately and that falsifying a time record is grounds for disciplinary action.5. Maintain complete and accurate wage and hour records for at least seven years.
  1. If using an outside payroll company, an agency must ensure the contract states that the payroll records are the agency’s property, the records will be maintained at a predetermined location in a readily accessible computer format for a minimum of seven years, the agency has the right at any time to inspect, audit, or request production of its records, and the records will be transferred to a new company immediately upon the agency’s request.
  2. Agencies must also practice what they preach, including disciplinary measures in their Codes of Conduct for violating recording and reporting rules. And, they must discipline violators consistently and uniformly.

[i] The FLSA companionship exemption is defined to include “an employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.” The exemption covers employees that provide “fellowship, care and protection” to such individuals, and has been interpreted to include engaging in “household work related to the care of the individual” (e.g., meal preparation, bed making, laundry, etc.), as well as other “general household work” provided such work is “incidental” to caring for the individual (i.e., does not exceed 20% of their total weekly hours worked). 29 C.F.R. § 552.6.
[ii] Although the NYLL excludes from its definition of “employee” “someone who lives in the home of an employer for the purpose of serving as a companion to a sick, convalescing or elderly person and whose principal duties do not include housekeeping.” (12 N.Y.C.R.R § 142-2.14(c)(1)(II).   New York courts and the New York State Department of Labor (“NYSDOL”) have said that home care workers employed by home care agencies, by definition, fall outside of the NYLL companionship exclusion, because they do not “live in the home of an employer.” Therefore, all home care workers employed by third party agencies are “employees” under the NYLL entitled to be paid at least the state minimum wage for all hours worked.
[iii] Courts have interpreted this interplay between the FLSA and NYLL “companionship” provisions, to mean that home care workers, are, by virtue of the FLSA’s companionship services exemption, entitled under the Miscellaneous Wage Order to receive at least the State’s minimum wage rate, as well as overtime compensation at a rate of 1-1/2 times the state’s minimum wage rate. See Ballard v. Community Home Care Referral Servs., Inc. 264 A.D.2d 747 (1999).

BENEFITS YOU CAN OFFER ON A NON-TAXABLE BASIS UNDER THE WPA

By Jeffrey S. Ashendorf

Executive Summary

The Wage Parity Act (the “Act”) states that covered benefits include, but are not limited to, “health, education or pension benefits . . .”[i] Further guidance in Home Care Worker Wage Parity Frequently Asked Questions (“FAQs”) states that this definition “does not exclude” (i) those benefits that may be elected under Section 193 of the NY Labor Law, and (ii) those benefits that may be provided under plans regulated under ERISA. This article discusses these categories in detail and also suggests other benefits that may be allowable under the Act and whether they can be provided on a non-taxable basis to home care workers.

DISCUSSION

Under the Wage Parity Act, “total compensation” is defined as “direct compensation paid to or on behalf of the employee including but not limited to wages, health, education or pension benefits, supplements in lieu of benefits and compensated time.”[ii] An initial FAQ said that employers may take credit for “health, education or pension” benefits “without regard to whether such benefits are provided directly by the employer or through a plan or program,” as well as “other employee benefits that an employer may provide through a plan or program”. An FAQ a month later explained that “qualifying benefits are those which primarily benefit the employee” (as distinguished from those that are primarily for the employer’s benefit). An FAQ two years later added that the Act’s definition of “total compensation” did not exclude other benefits that employers may choose to provide through employee benefit plans regulated under the Employee Retirement Income Security Act. Nor, said the FAQ, did it exclude other benefits that employees may choose to obtain through wage deductions permitted under New York State Labor Law §193. From a literal reading of “included but not limited to” in the definition of “total compensation” and the FAQs use of the phrase “does not exclude”,   it is arguable that in addition to those listed benefits, other benefits are allowable under the Act, as long as they “primarily benefit the employee.”

Benefits through “Plans Regulated Under ERISA”

Under ERISA, the term “employee benefit plan” includes “pension benefit plans” and “welfare benefit plans.” A “pension benefit plan”, or “pension plan”, is defined as:

a program established or maintained by an employer (or an employee organization, or both) to the extent that, by its express terms or as a result of surrounding circumstances, it (i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of their covered employment or beyond, regardless of the method of calculating contributions to or benefits under the plan, or the method of distributing benefits from the plan[iii]

An “employee welfare benefit plan” or “welfare plan” includes plans providing:

“(A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 302(c) of the Labor Management Relations Act, 1947 (other than pensions on retirement or death, and insurance to provide such pensions).

Under this definition, only plans that provide benefits described in section 3(1)(A) of the Act or in section 302(c) of the Labor-Management Relations Act, 1947 (hereinafter “the LMRA”) (other than pensions on retirement or death) constitute welfare plans.

*         *         *

. . . [Under Section 302(c) of the LMRA] only paragraph (6) describes benefits not described in section 3(1)(A) of the Act. The benefits described in section 302(c)(6) of the LMRA but not in section 3(1)(A) of the Act are “* * * holiday, severance or similar benefits.” Thus, the effect of section 3(1)(B) of the Act is to include within the definition of “welfare plan” those plans which provide holiday and severance benefits, and benefits which are similar (for example, benefits which are in substance severance benefits, although not so characterized). “[iv]

Distilling this definition down to a simple list, “welfare benefits under ERISA” includes: (i) health benefits (in all forms), (ii) disability benefits, (iii) death benefits (including life insurance), (iv) unemployment, (iv) vacation benefits, (v) apprenticeship and training programs, (vi) holiday benefits, (vii) severance benefits, and (viii) benefits that qualify as “similar” to holiday or severance benefits.

Benefits Employees “May Choose to Obtain” Under NYLL Section 193

Section 193 of the New York Labor Law exists to limit the types of deductions employers can take from employee wages. Other than deductions made in accordance with law (e.g., tax withholding), the only authorized deductions are specified in a list that groups categories of like items. For purposes of the Wage Parity Act, the benefits most likely to be chosen by home care employees for wage deduction are:

(i)     insurance premiums
(ii)     prepaid legal plans
(iii)     pension benefits
(iv)     health and welfare benefits (see “ERISA benefits”, below)
(v)     U.S. bonds
(vi)     discounted parking or transit fare media
(vii)     gym/health club membership
(viii)     day care expenses
(ix)     tuition, room, board and fees for (A) pre-school, (B) nursery, (C) primary,   (D) secondary, or (E) post-secondary education items.

Though there is a catchall item for “similar types of benefits,” the NYS Department of Labor has not given any guidance on what this includes.

Because all the items on the list are, by definition, for the primary benefit of the employee, they would all be allowable under the Wage Parity Act. But there are two caveats to consider.

First, an employer cannot provide the benefit to employees in addition to cash wages. The employee must elect the benefit instead of cash wages. This could be desirable to an employee if a benefit, like a gym membership, could be received at a corporate discount rate. Otherwise, the employee would likely want the cash wages.

Second, the benefit could also be attractive to the employee instead of cash wages, if its value were non-taxable to the employee. If the employee would be buying the benefit anyway, like a Metrocard, the employee saves money by not paying with after tax dollars. It can also make a benefit, like childcare assistance, more affordable. Most of the benefits on the list above can be made non-taxable to the employee if provided in the proper manner. In most instances, this will require creation of an Internal Revenue Code plan for the benefit. This has some administrative and operational cost to the employer, but usually not enough to offset the tax benefit to the employee as well as the advantage to the employer who is making this benefit available tax-free and may even be saving employment taxes.

For example, an employer may provide commuting tickets (i.e., transit passes) or parking (or under certain circumstances reimburse employees’ own purchases) on a nontaxable basis, subject to monthly limitations and subject to certain rules prescribed by the Internal Revenue Code. So long as the rules and the limitations are followed, the amounts provided to employees would be both (i) nontaxable, and (ii) fully includible as “supplemental wages,” i.e., benefits, for purposes of the Wage Parity Act.

A significant amount of overlap exists among the Section 193 items and welfare plan benefits. For example, “insurance premiums” will most often be paid in connection with a “welfare benefit”, prepaid legal plans are welfare benefits, day care expenses may be welfare benefits depending upon the details, a health club membership may be part of a health plan, etc.

Other Benefits

From a literal reading of the Wage Parity Act and the FAQs, it also appears that benefits other than those provided by plans regulated under ERISA or those listed in NYLL Section 193 may be allowable as “supplemental wages” under the Act. The only requirement is that the benefit must primarily benefit the employee, not the employer. Yet this requirement creates a conflict with income tax law principles, if the employer also wants the benefit to be non-taxable to the employee. A benefit that is primarily for the benefit for the employee will usually be taxable to the employee.

For example, where an item such as reimbursement for cell phone charges is offered, it is taxable compensation subject to income tax withholding and FICA taxes (both employer and employee), and is includible in the employee’s gross wages. The reimbursement is not tax-free to the employee because it is not covered by any fringe benefit exclusion under the Internal Revenue Code that so provides; and absent such an exclusion, the fringe benefit is taxable to the employee who performs the services for which the employee is paid, in cash or in kind.[v] (There are circumstances under which an employer-provided cell phone – but not cash reimbursement of cellphone plan expenses – can be tax-free to an employee when a phone is provided to the employee for “substantial non-compensatory business reasons.”[vi]) IRS auditors will also allow tax-free reimbursement of business-related cell phone expenses where the employer, again for “substantial non-compensatory business reasons”, requires the employee to use her own phone for business purposes, provided that the reimbursement is not paid as wages, or in place of wages or as a substitute for additional wages. However, such a reimbursement would not be “primarily for the benefit of the employee”, but for the employer. Also, it could not be said that the reimbursement of cellphone plan expenses was a non-wage payment, when the employer is simultaneously seeking to take credit for the reimbursement as constituting “supplemental wages”. Therefore, reimbursement for cell phone charges for a home care worker cannot qualify both as “supplemental wages” under the Wage Parity Act, and as a tax-free benefit. With reimbursement of cell phone plan expenses, therefore, the employer could just as well give the additional amount as cash wages with no restrictions on how it could be used. Thus, a taxable benefit is obviously more expensive to both the employee and the employer, since the employee is liable for income tax on the value of the benefit, and both employer and employee are liable for employment taxes.

The only way in which a taxable benefit is preferable to additional cash wages is if the benefit could be provided at a discounted value compared to its standard price (the price at which the employee could purchase the item herself). For example, if the employer were to arrange for discounted cellphone plans for its employees, that could be better than cash in the same amount. However, this will not always have the desired effect. When a fringe benefit is taxable, it is the fair market value of the benefit (reduced by whatever the employee pays for the benefit) that is considered income to the employee – the amount actually paid by the employer to purchase the benefit is irrelevant.[vii]

Four Steps to Offering Allowable Benefits to Your Employees

  1.  Identify and quantify (i.e., value) all benefits you believe your employees would want and that would help you to retain them and recruit new employees who may join you because of the desirable benefits you offer.
  2.  Determine which of those benefits may or may not be primarily for the benefit of the employee.
  3.  Determine which benefits may be delivered under a plan so they would be non-taxable to the employee.
  4.  Develop the required plan under the Internal Revenue Code to provide the benefit on a non-taxable basis to the employee and keep your administrative and operational cost for the plan as low as possible.

[i] N.Y. Public Health Law section 3614-c(1)(b)
[ii] Id.
[iii] ERISA section 3(2) [29 USC 1002(2)]
[iv] U.S. Labor Dept. Reg. 2510.3-1 [29 CFR 2510.3-1]
[v] Internal Revenue Code section 61(a)(1) [26 USC 61(a)(1)]
[vi] IRS Notice 2011-72
[vii] Income Tax Reg. 1.61-21(b)(1) [26 CFR 1.61-21(b)(1)]

Training Time

By Danielle Moss, Esq.

Executive Summary: Agency employed homecare workers must be compensated for mandatory in-service time, but need not be compensated for other training time if each of the following four criteria are met:

  1. Attendance is outside the worker’s regular work hours;
  2. Attendance is voluntary;
  3. The course, lecture, or meeting is not directly related to the worker’s job; and
  4. The worker does not perform any productive work during such attendance.

29 C.F.R. § 785.27.

Training time that does not meet these criteria is compensable because the Fair Labor Standards Act (“FLSA”) requires that workers must be paid for all “hours worked.”

Training time is hours worked when the training primarily benefits the employer. Whether or not training primarily benefits the employer is a question of fact. Both the United States and the New York State Department of Labor (“NY DOL”) will utilize the above four criteria, along with any other relevant considerations, that could help determine whether the training primarily benefits the employer or worker. In general, the more latitude, flexibility, and choice workers have with respect to their training, the less likely the time spent at such training will be compensable.

Discussion

Though training that primarily benefits the employer is generally compensable, pre-employment training is distinguishable from post-employment training. Time spent attending training programs that are a precondition to permanent employment may not be compensable. Bienkowski v. Northwestern University, 285 F.3d 138 (1st Cir. 2002). In Bienkowski, the court held that an employer was not required to pay probationary employees for hours spent at trainings, which were a precondition to their employment, even if the employees were permitted to complete these trainings while working for the employer on a probationary basis.

Certification Training

A state mandated training that enables a worker to obtain or maintain a state certification/license that could be used for any job, with any employer, is primarily for the benefit of the worker and not compensable time. Thus, time spent in training in order to obtain a certification as a home health aide or a personal care aide is non-compensable time.

In order to prevent training time from being compensable time, employers should ensure that the training offered is (a) outside work hours, (b) voluntary, (c) not directly related to the worker’s job (and in the alternative, if directly related to the worker’s job, that it is transferable) and (d) that no productive work is performed by the worker during the training.

A.          Outside Work Hours

If a worker attends training during regularly scheduled work hours, the training time is compensable. However, if a worker on her own initiative attends an independent school, college or trade school after hours, the time is not hours worked for the employer even if the courses are related to her job. 29 CFR 785.30. An employer should not impose additional requirements on a worker (e.g. taking a particular course for the benefit of the employer, filling out work assignments during such training, etc.), such that a worker’s attendance at such training, even if outside work hours, becomes compensable time.

B.          Voluntariness

Attendance at a training is not considered voluntary if it is required by the employer, or if the worker is “given to understand or led to believe that her present working conditions or the continuance of her employment would be adversely affected by non-attendance.” 29 C.F.R. § 785.28.

Employers should be mindful of how training is presented to workers by supervisors. If an employer, or the representatives thereof, communicate to a worker that they must attend the training prior to their assignment to a home care case, though the training may be “voluntary in name,” it may not be considered voluntary in fact, and could be considered compensable time.

It is important to note that if a home care agency’s license is conditioned upon the state required training of workers, the attendance at continuing education and/or state mandated licensing requirements is not voluntary and is compensable time.

C.          “Directly Related” to Worker’s Job

Training is considered “directly related” to the worker’s job if “it is designed to make the worker handle her job more effectively, as distinguished from training him/her for another job, or to a new or additional skill.” 29 C.F.R. § 785.29. Where a training course is instituted for the bona fide purpose of preparing for advancement through upgrading the worker to a higher skill, and is not intended to make the worker more efficient in her present job, the training is not considered directly related to the worker’s job even though the course incidentally improves her skill in doing her regular work. 29 CFR 785.29.

Time spent in “upgrade” training from personal care aide to home health aide is likely compensable and therefore, employers should be mindful of time employees spend at upgrade training.

In addition to upgrade training, workers may be interested in specialty trainings to improve their skills. Regardless of what that specific training may be (e.g., Alzheimer’s care) if the training directly relates to the performance of the worker’s job duties, such training time is most likely compensable.

There are special circumstances where a worker’s time spent in attending lectures, training sessions, and courses of instruction will not be considered compensable time. For example, an Agency may establish for the benefit of workers a program of instruction that corresponds to courses offered by an independent bona fide institution of learning. Voluntary attendance by an worker at such courses outside of working hours would not be hours worked even if they are directly related to her job, or paid for by the employer. 29 CFR 785.31.

D.          No Productive Work Performed

When productive work such as completion of Agency assigned work, study of materials distributed by the Agency, or other work-related assignments are performed during a training class, the time spent completing productive work assignments is compensable. Therefore, employers should not assign homework or materials for workers to review or complete in anticipation of, or following a training, if the employer does not want such time to be compensable.

Action Steps to Protect Your Agency

  1. The more latitude, flexibility, and choice workers are given with respect to a training, the less likely the training will be compensable. Employers should take steps to ensure that (a) the training(s) is transferrable to other jobs, (b) the training is held outside regular work hours, (c) the training is explicitly and implicitly voluntary, in that it is clear no repercussions will take place if workers do not attend the trainings, (c) that workers are not required or directed by the employer to take the training, and (d) no productive work is performed for the employer during the training.
  2. To further limit the risk that time spent in training is compensable, employers should (a) secure the training at an independent school, college, or trade school that workers attend on their own initiative, or (b) establish training for the benefit of workers that corresponds to courses offered by independent bona fide institutions of learning. If an employer establishes training for the benefit of workers that corresponds to courses offered by an independent bona fide institution of learning, a worker’s voluntary attendance at such courses outside of regular working hours would not be considered compensable time, even if directly related to the worker’s job.
  3. To effectively address the issue of payment for training time, agencies must notify workers that the time they spend in training must be recorded accurately.
  4. Agencies need policies and procedures that lay out how training time will be compensated, and how workers can report time spent in training to the Agency. An example of such “hours worked” procedures would be to require written notice from the worker of any hours worked beyond those scheduled, which would include time spent in compensable training. Workers should be required to provide such information in the same payroll week as the additional hours were worked.